How do you get a best-in-class MLM software solution without wasting resources? How do you run a good IT department without losing focus on your products—your core competency? In this episode, we talk to three guests, each from software providers in the direct sales space: Jared Smith, Director of R&D at InfoTrax; Clete Werts, an Enterprise Partner Manager at Avalara; and Darrel Welling, an Executive Vice President at ProPay. We learn about the value of partnering with specialists and the benefits of third-party software platforms. We also dive into Gartner’s way of categorizing software to optimize your decision making.

Full transcript

Kenny Rawlins: Hello and welcome to the MLM.com podcast. I’m your host Kenny Rawlins. Today’s episode is going to be a little different than our past episodes. We’ll have three different guest specializing with IT solutions and specifically we’ll talk about when to build versus when to buy or integrate or customize as the head of an IT department for an MLM or party plan company. First up we’ll talk with one of my colleagues from InfoTrax, Jared Smith. Hi, Jared how are you?

Jared Smith: Doing good Kenny, how are you doing?

Kenny Rawlins: Good. Thanks for joining us today. Jared is the head of R&D for InfoTrax Systems and I wanted to bring Jared in to get his thoughts. One of the things that he’s constantly looking at, as the head of R&D at a software company, is what do we build, what do we buy, and when do we integrate with other people. And every day in the software world it becomes easier and easier to integrate with other people. So, I wanted to pose the question to Jared: what would you consider if you were the head of an MLM, party plan, or network marketing company—the Head of IT? Where would you draw that line and what are some things you would consider when deciding whether to build, buy, or integrate?

Jared Smith: Well, that is the big question. I think that’s the question that every CEO, COO, CIO—anyone that’s looking to expand their software and differentiate themselves and give them a competitive advantage in their industry—asks themselves. How much money do I want to spend internally versus how much money do I want to spend integrating with someone, licensing their software? Or even there’s the question on “who do I acquire?” that sometimes they have to ask themselves as kind of a distant forth. And I always liked—when deciding what to add to our own product—I’ve always liked these three buckets that Gartner has built to push their functionality too. And the three buckets that they have out there they call their systems of records, systems of differentiation, and systems of innovation. And so, when I look to build software, I ask myself does this particular functionality fit in one of those three buckets? How that applies for R&D also applies for companies asking themselves whether I build them myself or whether I go to a third-party. I’ll explain the differences between those three buckets.

Your system of record is the thing that everyone does—that’s the same across the board. If I have a shopping cart I have to be able to add items to that shopping cart. That’s something everyone does. Everyone expects a shopping cart to be able to do that. Everyone expects a shopping cart to be able to calculate taxes, to be able to calculate freight, be able to accept their credit card, check out. That functionality is the same across the board. There’s nothing special about that. There’s nothing that’s going to give you a competitive advantage over your competitor being able to have a shopping cart that accepts a credit card. That’s a system of record. Everyone accepts that a shopping cart does that.

The system of differentiation is the thing that gives you that competitive advantage. That thing that you do better than your competitor does. Sticking with the shopping cart analogy, for example, Amazon, their 1-Click® buy now—you can hit that button and buy the product and have it shipped to you. That is something that they do, they have a patent on. They do that better than anyone else. That gives them a competitive advantage. That is a system of differentiation functionality that they have. Another example would be the ability to buy a book on Kindle and have that immediately sent to your Kindle. That’s something that’s unique to them, that they do well, that’s different than anyone else in the industry. That’s a system of differentiation item that they have.

And then of course the system of innovation that’s something that I specialize in, being in R&D. That’s the thing that does not exist yet, that no one has even thought of. That is something that you build. So you come up with the idea, you’re not quite sure how it looks, you start going into the agile process and go into sprints and working and failing fast and coming up with this new product until finally you discover what that is and it’s brand new and no one else has it… and you release it and it gives you this huge advantage. Of course, that’s a system of innovation type functionality.

And so, when you’re sitting down—if I was sitting down as the head of a MLM business and I said, “Okay, in order for me to be successful in my business the first thing I need is a shopping cart.” I’m not going to build that myself. There are lots of shopping cars out there that do everything that I need. That’s a system of record. To me that’s a no brainer. Integrate.

Kenny Rawlins: Well and it’s interesting. I’ve obviously heard you talk about this before and just as you were explaining it now, the thought came to me that by building a system of record—that already exists, that there are multiple options out there that you could utilize either through a SaaS agreement or some other licensing agreement—you’re actually in some ways creating a liability for yourself because now you’ve taken on the onus of staying up to date with that technology. Because a lot of things aren’t competitive advantages but they can become disadvantages, right?

Jared Smith: Right.

Kenny Rawlins: If you don’t properly take a credit card or properly calculate tax and freight and stuff… nobody gives you credit when you do it correctly but they’re sure mad when you do it incorrectly.

Jared Smith: Absolutely.

Kenny Rawlins: So, that’s one of the things that stood out to me as you were talking about the systems of record is that that can pretty quickly become a liability because you’ve got to maintain it, you got to stay up to date, you know, stay competitive with what is evolving in the industry. And when there’s somebody who’s made that their specialty, they’re putting R&D dollars towards that. You talked just about what we do at InfoTrax. You know, we’re working actively to make our commission engine better all the time, not just for one commission plan but across the board. And so, you’ve now taken that on. And there used to be a time where that was more justifiable because customizing and integrating were so much more difficult. I have a hard time seeing why a company would take that on at this point.

Jared Smith: Exactly. I know. And that is a very common mistake and a very easy mistake to make is those items that are considered systems of record is… “oh, that’s easy to do,” you know? It already exists. You know how it works. You say, “You know what we can bring that in and we can build that ourselves.” But as you said you’re taking a lot of risk because every system of record has considered a number of different items—number one they’ve considered reliability, they spent a ton of dollars and manpower to make sure that that system’s up and running all the time and that it’s always there available and it’s working. You got to make sure that you’re matching that. Governance is a big one. Are you meeting not only the governance on how people use it but also the governance of federal or international regulations that are attached to that system? Paying out commissions comes with all sorts of federal policies and rules that have to be followed. You’re now taking that risk on yourself instead of letting a third-party handle that for you. And so, some companies might be tempted to say, “You know what that exists. We know how that works. Let’s just do it ourselves,” without realizing how much risk they’re taking on them when they make that decision. And so, they have to be careful on that. If someone already does it—they have the expertise—integrate with them. Go ahead and make a deal and let them do that and you focus on the things that you know that you can differentiate between you and your competitors. That can give you that competitive advantage. Focus on that system of differentiation.

Kenny Rawlins: Yeah and I think that really is the best advice that I’ve heard when talking about “well should we build or should we buy?” It’s kind of the introspective look of saying, “Okay, what are we hoping to gain from building it ourselves and what are we willing to do in order to gain that?” Right? Are we willing to all of a sudden expand our expertise and our valuable resources to cover those bases as well as then focusing on what really you’re good at? And not just differentiate you from an IT perspective but most MLMs, most party plans are not IT companies, right? They’re a product company and they want to be focused on that product. And by having a healthy view of, “Okay, what’s out there?” it allows you to preserve your resources to focus on what you’re really good at which is your product and your opportunity.

Jared Smith: Exactly.

Kenny Rawlins: We were talking a little bit earlier just in preparation for this and so many people will think of integrating just in terms of APIs which I think is more and more the most common thing but they’re also… you were talking to me about applications specific languages. So, when we’re talking about integrating, what type of stuff is out there or how would somebody go about starting up and what would they look for?

Jared Smith: When you talk about integrating the first thing that you want is you want to make sure that you have a good base or a good platform that you’re running on. That platform can give you a number of different advantages to be able to integrate. The one is the very simple plug and play API integrations. That platform may say, “Hey, we support connections to, for example, tax software or credit card software or commission software.” We just allow you to take those credentials or APIs keys and connect and you’re in there. You’re now calculating taxes with Avalara or you’re calculating points or payments with Hyperwallet or some other, you know, third-party companies out there and you’re able to connect those in with the APIs and it’s up and running and it works, and you don’t have to do any extra work. And that’s great because that gets you connected to those system of record type third-party applications.

When it comes to the time that you’ve got a really great idea that you’re saying, “okay, we’ve got a promotion,” or “we have a flow in our shopping cart,” or “we’ve got a point system,” or “we’ve got some other really great idea that’s going to make us better than anyone else in our industry,” That’s when you need to take the next step. It’s more than just an API connecting to an existing third-party. It’s now you’re creating something unique. You’re bordering on that system of differentiation and system of innovation type functionality and that’s when you’re going to need to actually get in there and create something new and create something different. That’s when you want that platform to give you a little bit more flexibility and this is where we come in to the application specific languages or the domain specific languages, DSLs. Netsuite has a good example of this. They have their SuiteScript which is kind of a JavaScript that allows you to go in there and create a custom screen or custom flow—allows you to change the functionality. There’s some other platforms. Our own platform allows you to go in there and modify how DataTrax or maybe Evo flows. Some of our sub routines… that if you have someone with basic to moderate IT knowledge that you can bring on staff or even… you have an agreement with that platform owner that they can go in there and create this competitive advantage functionality for you—that exists within that platform, within that ecosystem—and then launch it, get out there in front of your user and that gives you that new functionality and that competitive advantage for a low cost. Definitely a lot lower that bring on the full IT staff and creating the whole platform and then your new functionality on top of that platform from scratch.

Kenny Rawlins: I think that’s one of the key things that is important for people to think about is that not everything will be done simply through integration but by selecting a correct partner in a platform provider—that you make sure that you do have points where you can step in and say, “Okay, I like 90% of what you have but I want to do this 5–10% to differentiate myself.” And a good platform provider will have that ability. Now we really are talking about having the best of all worlds where you are able to offload the overhead and the liability of creating and maintaining a platform all on your own. You’re not forced to recreate the wheel because you can go integrate with people who do very common things who are staying at the top of their field. But then you do have the ability to get in and change things a little bit or personalize and customize things to suit your need without having to have a full-bore IT staff and now all of sudden say, “Yeah, we’re company XYZ that has this great product and we’re also a technology company.” And I think we’ll end it there. I mean, do you have anything else that you think people should be aware of or any other thoughts?

Jared Smith: My final thought would be that that ideal platform definitely gives you a scale of entry. You can connect very easily in that plug-and-play API and go in and set up a couple preferences that change how the platform works to that domain specific language, to be able to create different new fields on the screen or new flows to straight-up allowing you to write the program in a specific language and insert that program to completely change the functionality of the platform. And that’s something that I would look for and that definitely exists out there. Platforms that allow you to really take your company where you want it to go. And then you spend time thinking about that instead of thinking about how you want a shopping cart to run or how credit cards need to work or any of those system of record type systems.

Kenny Rawlins: Well Jared, thank you that is really great information and we look forward to having you on the podcast again soon.

Jared Smith: No problem, appreciate it.

Kenny Rawlins: Next, we’ll be talking with Clete Werts, an Enterprise Partner Manager at Avalara. Good morning Clete. How are you?

Clete Werts: Great, how are you doing?

Kenny Rawlins: Good. I appreciate you coming on the podcast with us and talking a little bit about the benefits of working with a third-party vendor. Before we dive into that, why don’t you go ahead and give us a little bit of background on Avalara, on the services you guys provide.

Clete Werts: You bet I appreciate that. So, Avalara. We’re based out of Seattle, Washington. We’ve been in business for over 15 years. Avalara is a global sales tax company. So, our whole mission is to automate, simplify, and increase compliance for organizations when it comes to sales tax. So, our cloud-based sales tax technology allows us to plug into hundreds of ERPs, direct selling, e-commerce platforms to automate and manage sales tax wherever customers need that.

Kenny Rawlins: Well, I think that’s a perfect segue into what we’re talking about today because our big emphasis right now is kind of discussing whether a person should build something in-house or partner with a third-party vendor. And you start talking about sales taxes, and especially going global, that’s such a complicated thing that I’d be surprised if many people try to take that on on their own. And especially where partnering has become so much easier. What would you say to somebody who is considering using third-party tools versus building something in-house?

Clete Werts: Well, I think it all comes down to—from an organization’s perspective, you know—what are you really good at? Software services today specialize. And so, you look at Avalara, you look at a lots of direct selling platforms, you look at e-commerce, they specialize in specific needs for organizations. And so, from an organization’s perspective, where do you want to spend your time, money, and resources? And what I found is that when you look at third-party platforms or software platforms, they do their job really well. And so, whether that’s a back office or e-commerce or… Sales tax is what we do. That’s all we do, right? And so, for organizations looking to automate and manage, and looking to off-load versus hiring somebody in-house—the cost, the resources, the time, the risk of doing it themselves—the benefits for organizations are using other resources to help drive revenue for their organization.

Kenny Rawlins: Yeah. That really succinctly summarizes my view of it as well. In our last episode on the podcast we were talking to Moy Chambers—who is the Executive Vice President over IT at LifeVantage—and he was talking about how his goal is to only do the things that really affect their relationship with the distributor, right? So, he wants to be able to control that relationship. And the beauty of third-party tools today is that he can do that, right? He can pull in an Avalara, pull in another third-party, and still control that relationship and what their distributors see without having to all of a sudden become a tax expert or become an expert in shipping or other things like that.

One of the things that we’re experiencing is, it’s getting ever easier to integrate. It used to be one of the arguments for bringing it in-house was that you had more control over it and the time it takes to integrate. But so many of the partners out there are getting so much better—through the API layer—at allowing people to integrate. What are you seeing on that front and what is Avalara doing to make that even easier?

Clete Werts: When you look at APIs today versus 10 years ago, it’s a whole different world. I mean if you just look at technology in general. Technology is moving so quickly. When you look at using third parties, their jobs are to keep up with the latest technology. And so when you look at automation, when you look at technology. Doing it in-house… it’s harder for organizations in-house to keep up with technology, and keep up with the latest integrations or code, or whatever that is. And you look at APIs you know, the ease with which organizations can take an API—whether it’s a REST or a SOAP API. There’s so many different APIs based on the technology resources you have to plug in to whatever systems that you need. So today the ease with which you can plug in to your systems—and again, most of the organizations I’m working with, have multiple systems, like you said whether it’s a billing system or a back office system, an e-commerce system—they need a cohesive way to plug all of those systems together to run the business.

And here’s the other thing, a lot of their third-party platforms, or third-party software companies have relationships already. So a lot of times you don’t even need to use an API to plug in to a system; those relationships and those integrations have already been built. So I know from Avalara’s perspective we have over 700 pre-built integrations to all sorts of platforms. So you may get a third party and already have the integration built—it’s already done you just plug it in.

Kenny Rawlins: And that’s an excellent point and I also like the point that you brought up about, by partnering with somebody that specializes in the specific thing, they’re staying ahead of the game—both from a technology stand point but also when it comes to the thing that they specialize in. You know, I imagine as different clients of yours go to open different countries or come up against different tax questions, those are paths that you guys have already walked down and they don’t have to reinvent the wheel because they’re partnering with you who’ve already experienced that.

Clete Werts: And you look at your go to market strategy… third-party platforms, or third-party systems allow you to get into whatever that is—whether it’s going global or into a different country. They’ve already done it, right? And so why, as you refer to it, why reinvent the wheel? It’s already been invented, it’s ready to be used. So now again you think about time to market, or you want to customize and do something yourself in-house. That takes time, cost, and the biggest one is risk. I’ve talked to a number of organizations that have tried it in-house. They said “oh no, no, we can do this. No problem.” A year later it’s still not built, they’ve sunk X amount of dollars into it, and they still aren’t in the market that they want to be in. There’s a lot—when you talk about cost—there’s a lot of different costs when you look at software, third party, going to market etcetera.

Kenny Rawlins: Yeah. I like that word that you used—risk—because you can be putting yourself at quite a bit of risk or taking risk off of your hands by partnering with the right third parties, and it can really… I mean we’ve experienced it where people are just blown away by the time in which we can provide a solution that they just think is so daunting. Not because we’re brilliant—although I like to think we are—but more because of the experience that comes with it, right? These are problems that we’ve seen before. Our clients, there are things that they’re experts at, and our goal is to allow them more time to work on the things that they’re experts at and that really differentiate them from their competitors, and offload the things that not only are they not experts at but they don’t want to have to be experts at, right? And I’m sure that’s you guys’ take with tax. Not every company needs to be a tax expert. And the beauty of the landscape that we work in right now is that we are allowing each other to leverage off of one another. I remember back when InfoTrax had to be much more tax-centric, just because the integration was not as easy as it is now. And now that’s something we don’t even mess around with.

Clete Werts: You’re exactly right, and I think a lot of times organizations looked at—whether it’s tax or a back office, or shipping systems, whatever it is, credit cards—and they’d go, “Oh! You know, that’s really simple.” And when you really look at, you know regulations, when you look at compliance, when you look at PCI compliance, or whatever it is, there’s a lot of complexity to it. And most organizations, they don’t want to be a sales tax expert or a back office systems expert or they don’t want to hire a bunch of developers. And so that’s the process that organizations go through—that process of going through, “okay let’s assess what are our needs?” And a lot of times that’s really where the crux of the issue comes in. They don’t know what their needs are. And trying to get a really good understanding of “this is where you want to go. Here are your requirements and needs—immediate needs versus mid- to long-term needs etcetera.” And then how are your third-party systems going to address your immediate, mid- and long-term requirements?

Kenny Rawlins: Yeah, that’s perfect. I think we’ll leave it right there. We appreciate your time, I just think that it’s such a good perspective. If I we’re a company staring today, or even in business today, I would ask that same question. “Are these things that we need to be experts in? And how could another third-party address this need that we have?” And by asking yourself that question you can make your life a lot easier and allow yourself as the head of an IT department to sleep a lot better at night. Thank you so much for your time, Clete. We look forward to having you on the podcast again soon.

Clete Werts: I appreciate the opportunity.

Kenny Rawlins: And finally, we’re talking with Darrel Welling who is an Executive Vice President at ProPay. Hello, Darrel. Thanks for joining us.

Darrel Welling: It’s my pleasure.

Kenny Rawlins: So before we dive in to talking about third parties in general, I thought maybe we’d give our listeners a chance to know a little bit about you and ProPay. Could you give us a little bit of background on ProPay?

Darrel Welling: Sure. ProPay was founded in 1997, and really since the companies had any appreciable business or size we’ve been focused on direct sales. So the last 17, 18 years, direct selling’s been about 80% of our business. And we’ve partnered with industry experts to bring best-of-breed solutions to the industry around payments, both in credit card processing and making payments or commission payments to distributors or consultants. And that’s been the core focus of our business.

Kenny Rawlins: Okay. In order to do that, people are integrating with you both to take payments and then also to pay out, and today we’re talking about third party integrations. With our other guests we’ve talked about some of the benefits that come from partnering with a third party, because you’ve got somebody who’s focused specifically on what it is that they do best. In the payment arena, how does that benefit your clients? You talk about how you guys focused, not even just on payments, but payments within the direct selling space. What would you say are some of the benefits that clients get because of that?

Darrel Welling: I think what you do is you get a company who focuses on being good at one thing, versus average at many. And you can start to bring together a best-of-class product or solution. And as I look at our payment platforms, our ability to stay up on the most current both card regulation or regulatory environments as well as the legal environment when it comes to privacy and card protection and data protection, as well as the solutions we bring to bear, are all, you know, laser focused on payments and on direct selling, so that all of these things makes sense. I look at, you know, what we’ve done with InfoTrax for example on some of the fraud situations, where we got a best-in-class fraud tool that works great for companies like Disney and others, who are wanting to bring down their online fraud. But then we go a step further with our back office partnership with InfoTrax and we actually bring in data elements like “is this an orphan distributor?” and data elements that are very specific to direct selling. I think the fact that we stay abreast of the industry in terms of payments as well as then, how does that relate to direct selling is kind of an added benefit.

Kenny Rawlins: I think you bring up a good point that maybe people don’t think about when they’re first starting out, or even maybe when they’re in the trenches trying to run their own IT department. There’s the bare minimum level of stuff (can I take a credit card payment? can I payout to my distributors?) but then there’s that next tier of things that you’re talking about where you’re actively solving problems that people may not even know that they have yet. And especially in the area of fraud and privacy, what are some of the big changes that people should be aware of that they’re probably not.

Darrel Welling: I think with fraud, you don’t know you have a problem until you have a problem. And that’s always kind of scary. We’ve seen over the last couple of years several big direct selling companies literally get lit up overnight. Going from not having a fraud problem at all to being on Visa’s watch list, being fined by the card brands, and even risking their merchant ability to accept cards. So, having those solutions that are already developed and already ready to go and already part of the integration where our customers don’t have to do much is a huge deal.

Another thing is you may have a card processor but you don’t think that, boy, in two years you might want to go international. Are those solutions in place? Do I have to recode or do I have a platform that’s robust enough? Whether ProPay’s the processor or we’re going to go to somebody else. Can my current integration to ProPay get me to China or can it get me to England or wherever it may be? I think as you look at the bare minimum, that’s great to get up and going, but it may cause you to completely recode if you don’t have some forward thinking. You know things like holding your own credit card data is a really expensive proposition to do it right, and if that is not your core competency, it’s hard to imagine that you can’t save money and aggravation and sleepless nights by partnering with somebody who does it for you know tons of big companies and that’s what they do every day.

Kenny Rawlins: You know and that phrase that you used right there, “core competency,” is kind of the thread that I’ve noticed, running throughout my conversations—both relating to the Podcast and just other conversations with other third-party vendors. Partnering allows you to focus on what your core competency is. It allows you to focus on what differentiates you from your competitors and it off loads those things that everybody has in common, right? That there’s not a lot that doing your own credit card processing, or doing your own tax validation, or doing your own warehouse oversight gives you that differentiates you from your competitors. But not being up to snuff, not being able to respond to fraud and to international expansion needs can be a real detriment to your business. So I think that’s one of the things that really stands out to me.

Darrel Welling: Absolutely.

Kenny Rawlins: Now the other thing that I think is coming up on people by surprise is it used to be that there was something to be gained in doing stuff in-house because it was difficult to partner. Obviously in 2017 a lot of people don’t believe that’s true anymore and our experience is that that’s not true anymore. And I know in working with you guys, one of the things that you guys work very hard at is to make it easy to integrate, so that you don’t become the bottle neck. Talk to me a little bit more about what you guys do to stay ahead of the technology curve for your clients.

Darrel Welling: Well I think that’s a goal—something that you are chasing. You never arrive at being easier or faster or better. And it’s something that we’re constantly doing. You know whether it’s a developer portal, or spending time and effort integrating to back offices so customers don’t have to do that themselves. Again, I think you’re back to core competency, is that what we’re worried about every day? Yes. We want to protect your data, we want to make it easy for you to get in, we want to make it cost effective, and that’s why we come to work. It’s to get better at all of those things every day. But you know integration is as easy as you can make it, but it’s still a chore. I think one thing we’ve done is, we’ve gone out and partnered with companies like InfoTrax. So customers just don’t have to worry about it. It’s part and parcel of what their buying, when they’re buying their back office.

Kenny Rawlins: Yeah. Darrel, I appreciate your time, and I think we’ll leave it there, because you’ve really brought up some good points. I would reiterate just what you’ve said is that by partnering with the right third parties you’re really making your life easier and buying yourself some sleep at night, right? So that you’re worried about the things that differentiate you from your competitors. You’re not worried about, you know, security breaches, you’re not worried about fraud overseas, you’re not worried about new regulations that are gonna come down the pipe, because you’ve partnered with people who are worrying about that for you. Have I missed anything Darrel?

Darrel Welling: Nope, I think that’s dead on.

Kenny Rawlins: Alright, perfect well we appreciate your time and we look forward on having you on the podcast again soon.

Darrel Welling: Thanks so much, Kenny. Have a good one.

Kenny Rawlins: That’s it for today’s episode. Thank you for listening and again a special thanks to Jared Smith, Clete Werts, and Darrel Welling for their time and expertise. As always, we’d love to hear what you think. Feel free to give us feedback on MLM.com or leave us a rating wherever you get your Podcasts. And finally, a very special thanks for production support from Adam Holdaway and Jana Bangerter. We hope you tune in next time.